Investors having tough time copying Buffett’s strategies these days; Sage of Omaha’s transition to master financier baffles some, but homey advice still rings true

Investors having tough time copying Buffett’s strategies these days

Sage of Omaha’s transition to master financier baffles some, but homey advice still rings true

BY JOSH FUNK

AP MAY 6, 2013

The perilous cult of Buffett

May 6, 2013 – 3:10PM

John Addis

Last Friday and Saturday, Warren Buffett hosted his insurance-to-ice cream conglomerate’s annual general meeting. Known as Woodstock for capitalists, the two-day jamboree has all the elements of a religious festival, with devotees basking in the reflected glow of their guru. There’s something stomach-churning and perhaps, in an investing sense, costly, about such veneration. This year, up to 40,000 followers attended the jamboree, visiting the sites of religious significance: a barbecue at Nebraska Furniture Mart; an exclusive shareholder shopping day at Borsheim Jewelers; a NetJets tour. True believers can get even closer to God in the most intimate way by wearing the exclusive $5 Fruit of the Loom “Berky Boxers” featuring a motif of Buffett and Munger themselves. But for an overwhelmingly reverential experience, nothing beats a slab of meat, a serving of chips and a root beer at Gorat’s, Buffett’s favourite steakhouse and the closest value investors get to an ashram.

I’ve never been to Omaha and have no plans to do so (although I have attended Munger’s Wesco meeting). I hate crowds and there’s nothing that investors get from the meeting not available online, except the experience of being there, which, of course, is the point.

Omaha is to investors what Lourdes is to Catholics. The very act of attending inducts you into the cult and confirms the extent of your belief, whether you like it or not.

Which is of course where the danger lies. In adopting a guru, one abdicates a sense of autonomy and self-reliance, skills crucial to investing success.

This isn’t Buffett’s fault. In fact, he goes out of his way to prove his fallibility.

This year Buffett called on hedge fund manager Douglas Kass, who has been shorting Berkshire stock, to make the case against the company.

By all accounts he failed, thus reaffirming the mythology of Buffett’s munificence in the eyes of his followers.

The cult of Buffett is so entrenched that its most vociferous critic is Buffett himself, who regularly administers large doses of self-reproach for poor decisions.

Such hero worship is dangerous, dispensing as it does with the one thing all successful investors need: scepticism.

The idea that there is one true way, one path to riches, sign-posted by a pair of octogenarians with a fondness for peanut brittle, is one that Buffett and Munger themselves would be first to reject.

To be a successful investor you need to think independently and correctly, a phrase Buffett regularly trots out. That means the last thing you should do is join the cult of Buffett.

This article contains general investment advice only (under AFSL 282288).

John Addis is a director at Intelligent Investor and doesn’t own either Berkshire Hathaway A or B shares. BusinessDay readers can enjoy a free trial offer to Intelligent Investor Share Advisor, including access to 17 current Buy recommendations. For more Intelligent Investor articles click here.
US billionaire Warren Buffett optimistic on stocks

May 6, 2013 – 8:30AM

Billionaire Warren Buffett is praising the policies of both President Barack Obama and his predecessor George W. Bush for moving the US economy in the right direction.

US stocks soared to new closing records Friday after a strong US jobs report that saw unemployment fall to 7.5 per cent revived confidence in the economic recovery.

They don’t look overpriced. They certainly look more attractive than fixed-income investments to me 

The 82-year-old investor known as the “Oracle of Omaha” said he was optimistic that stock prices would continue to rise.

“They don’t look overpriced. They certainly look more attractive than fixed-income investments to me,” he told ABC’s This Week television talkshow in an interview that aired Sunday.

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Buffett said the economy has been improving gradually over the last four years, and it will take time before the US experiences more rapid growth.

But he praised the monetary and fiscal stimulus measures enacted under Bush and Obama.

“We’ve had a lot of fiscal stimulus. We’ve had an extraordinary amount of monetary stimulus. And I think those were the right things to be doing considering the incredible situation that existed in 2008,” he said.

“Nothing is perfect, but we had some huge problems in 2008. And our country is doing reasonably well coming out of that.

“It’s a lot slower than people would like, but it was a lot bigger problem than any of us had ever seen.”

Buffett added: “I generally approve of what … the Bush administration did. I approve of what the Obama administration has done.”

But he also criticised the political discourse in Washington for becoming “more and more partisan”.

“So many elections are determined by the primaries and not the November elections, that it does tend to push both sides to the extremes and to cause them to dig in and feel that they can’t bend from positions,” Buffett said.

The chief executive of Berkshire Hathaway, a holding company of about 70 businesses, also spoke in favour of immigration reform that would offer foreign students the chance to become citizens.

He said the US would benefit by making structural changes to ensure women are not relegated to a small sector of the economy.

The US Labor Department report found that the US economy added 165,000 jobs in April, well above market expectations, and also revised upward estimates from the previous two months.

The gains came even as taxes rose and government spending tightened under the sharp “sequester” cuts, which still threaten to hold economic growth back this year.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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